Why People In This Indian Hill Paradise Need Not Pay Income Tax

The Union Budget of 2008 repealed the Sikkim Tax Act and exempted Sikkim residents from paying income tax through Section 10(26AAA) of the Income Tax Act.

As the rest of India scrambled to meet the July 31 deadline for filing Income Tax Returns (ITR), one state remained blissfully exempt from the tax frenzy - Sikkim. Thanks to a special provision under Section 10 (26AAA) of the Indian Income Tax Act, Sikkim has been spared from paying income tax since its merger with India. This exemption was granted to preserve the state's existing tax structure, which was in place before it joined the Indian Union.

Prior to its accession to India, Sikkim had its own tax system, and its residents were not subject to the Indian Income Tax Act. The Government of India, to maintain the status quo, granted Sikkim special exemptions from income tax.

The Union Budget of 2008 repealed the Sikkim Tax Act and exempted Sikkim residents from paying income tax through Section 10(26AAA) of the Income Tax Act. This move was made to preserve Sikkim's special status under Article 371(f) of the Indian Constitution.